Minimum Energy Efficiency Standards in the Non Domestic Private Rental Sector
From the 1st April 2018 there are new laws coming into effect which will impact the non domestic private rental sector
From April 2018 changes to legislation will make it unlawful to agree a new lease (as well as lease renewals) for a commercial property with an Energy Performance Certificate (EPC) rating below an E. This will expand to include all privately rented property from 1st April 2023.
Allthough this date seems far away, the new laws may require landlords/property owners to make improvements to their buildings' energy efficiency to get them up to standard; which could take some time to implement.
1 April 2018-
The regulations will be enforced upon the granting of a new lease as well as a lease renewal
1 April 2023-
The regulations will apply to ALL privately rented property in scope of the regulations, including where a lease is already in place and a property is occupied.
Implications of MEES
As of February 2016 it is estimated that 20% of non domestic properties have an EPC rating of an F or G, meaning that unless they were upgraded to meet the minimum standards it could be deemed as illegal to rent them.
- The valuation of a properties not meeting the standard will be affected as their marketability will be diminished.
- Rent reviews on F and G rated properties may be adversely affected
- There may be implications for dilapidation assessments, where landlords have a legal responsibility to ensure the property is maintained to the standard agreed in the contract.
Financial penalties for non compliance will be linked to the rateable value of the property, but could be as much as £150,000.
There are some instances that have been underlined by the government where landlords may be exempt from compliance with MEES.
Landlords can be made exempt if they are able to demonstrate one of the following:
- They have carried out all cost-effective energy efficiency improvements.
- Measures identified by Green Deal or an alternative government scheme are not cost effective.
- If third-party consents are not available.
Landlords and their agents should act now by commissioning an up-to-date Energy Performance Certificate which will identify the current rating (which may have changed over time), as well as recommend opportunities for improvement.
For further information please feel free to download our guide to 'Energy Efficiency in the Non Domestic Private Rental Sector'.